China's growth forecasts revised upwards
( 2003-09-26 11:29) (China Daily HK Edition)
Stronger-than-expected growth in investment and exports has prompted both domestic and foreign institutions to revise upwards China's GDP growth forecast for this year and next.
The latest research report from Hongkong and Shanghai Banking Corp (HSBC) said that the company has revised China's GDP forecast from 7.1 per cent to 8.2 per cent for this year and from 6.6 per cent to 7.5 per cent for 2004.
"The upward revision for 2004 is largely a reflection of the impact of the continued shift of global manufacturing into China and hence an expansion in China's global export market share," the report said.
Meanwhile, Goldman Sachs, in its latest China economic research report, also raised its forecast for growth from 7.0 per cent to 8.1 per cent this year and from 7.5 per cent to 8.4 per cent for 2004.
There is no reason to underestimate China's economic performance since the nation's economic fundamentals and external atmosphere are pretty good, the company said.
Mainland economists and experts are even more bullish.
The State Information Centre (SIC), in a report published yesterday in China Securities newspaper, predicted that GDP would grow by 8.3 per cent this year.
"The trend that China's economy is moving to a new round of expansion is even clearer now," the report said.
Next year, growth should be maintained at between 8.3 per cent and 8.5 per cent, the SIC said.
Wang Tongsan, economics professor with the Chinese Academy of Social Sciences, said as the nation's economy recovered unexpectedly fast from the blow of SARS outbreak, it will be able to achieve 8.3-8.5 per cent growth this year.
Both domestic and overseas analysts believe that 2004 will also witness strong economic growth in China, thanks to the improving world economic situation.
"The growth rate in 2004 won't be lower than this year with the world economy taking a turn for the better," he said.
"Growth in the US and Japan - the two largest markets - has turned out to be much stronger than expected, boosting demand for China-manufactured goods," said Qu Hongbin, analyst with HSBC.
China's economy witnessed rapid growth starting early this year with GDP posting an eye-catching 9.9 per cent growth in the first quarter.
The figures then encouraged most research institutes to forecast that the country's whole-year growth could be a hefty 8.5-9 per cent.
But they revised their forecast down to around 7 per cent, or even lower, when the SARS outbreak swept across the country from April, dealing a heavy blow to industries such as retail, tourism and transportation.
"The strong economic rebound in the past several months indicates that SARS didn't have a severe impact on China's economy," Wang said.
However, both domestic and foreign research institutions agreed that amid the fast growth, there are some factors which might derail economic development such as an investment fever in some sectors, over-lending by commercial banks and slack consumption demand.
The central government has taken measures to cool down the investment fever and tighten credit growth, which reached a record 23 per cent in August.
Starting last weekend, the central bank raised the deposit reserve requirement ratio from 6 per cent to 7 per cent.
Experts say a higher reserve ratio would reduce the funds available for banks offering new loans and is expected to prompt the banks to focus funding on lucrative projects, which in turn will curb blind investment fever.
"We expect credit growth to slow to less than 18 per cent by the first quarter of 2004," the HSBC report said.
Given that banks are the main source of financing, the credit tightening is likely to slow growth in fixed-asset investment from 30 per cent year-on-year in August to 15 per cent next year.
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